It may seem like you have a lot of time before you hit 65, plenty of good years to work and save, but there are a lot of factors to take into account when planning for those golden years, and working out a financial plan when you're young and flexible seems to be a more appealing option for a growing portion of Americans.
The Hartford Financial Group found that more people between 18 and 30 years old are looking to retirement planning than other age groups; 95 percent of them are looking for employment options with guaranteed income for the twilight years as part of 401(k) plans or employer-provided benefits packages.
"Americans, regardless of age, want the ability to create a guaranteed income for their retirement as traditional pension plans vanish from the scene," said assistant vice president of The Hartford's retirement planning group Patricia Harris in a statement regarding the study. "We also found that the farther retirement appears on the horizon, the greater the appeal of guaranteed income."
Clouds on the horizon
The reason for this early planning could be based on economic factors or simply the retreating age of retirement. According to the Social Security Administration, you might be able to start receiving benefits as early as 62, but some people will have to wait until 70 to qualify for government assistance, and that's if the program is still in operation at the time you retire. For those who choose to retire early and claim benefits, the option may be there, but the payable amount could be reduced up to 25 percent.
This means that an increasing amount of money would need to be furnished by retirement plans and other investments as out-of-pocket expenses also continue to rise, meaning cash flow will be integral later in life. According to a Fidelity survey, a couple that retires this year should expect to pay $240,000 in medical expenses over the course of their retirement. The amount has been increasing 6 percent annually since 2002, and with Medicare and other government-sponsored healthcare plans still shifting, as well as inflation continuing to alter price ceilings, that total may rise in the future.
Making up the difference
•Right now about half of all Americans aren't paying into a retirement plan according to a LIMRA study. That contributes to Fidelity's findings that over a quarter of U.S. retirees will have shortfalls in their income thanks to inadequate retirement planning. Taken together, this would explain why more young people are emphatic about getting on the 401(k) bandwagon at a younger age. However, if you haven't yet invested in any plans, there are still options apart from playing lotto.
•Seek financial investment advice for things like stocks, bonds, CD's and money market accounts. The more diversified your portfolio, the more likely you are to see a turnaround, and even with slow maturation bonds and CDs, the money will be there later when you need it.
•Open an account dedicated to retirement savings. Put aside as much as you can and don't dip into the funds even for an emergency. You'll need it more when you're 70 and can't make up the difference.
Wait to retire. This may be the hardest step, but retiring early will negatively impact how much you get both from retirement savings plans and Social Security.
Retirement may feel like it's a long time coming, but as the amount of public funds decreases and inflation continues to impact expenses, it's important to know you have a strong financial plan in place so you're well cared for.